The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

One of the more enraging stories of complete and total incompetence within government is just about to unfold. This is the looming "dairy cliff". The full details are here at the WSJ. But in a nutshell, because Congress hasn't passed a Farm Bill, the country is going to end up going back to a 1949 law. What's worse, the provisions of that bill are based on prices forty years earlier again:

Instead of Americans enjoying a bounty after the clock runs out, federal farm policy will automatically revert to a farm bill drawn up in 1949. That will compel the Department of Agriculture to roughly double the price supports for dairy and other farm products thanks to a mystical doctrine called "parity."

The doctrine was concocted by Department of Agriculture economists in the 1920s to "prove" that farmers were entitled to higher prices than the market provided. The official parity calculation was based on the ratio of farm prices to nonfarm prices between 1910 and 1914, the most prosperous non-wartime years for farmers in American history.

And that's mad. Completely barking I'm afraid. For the ratio of farm prices to non-farm prices has been falling since the neolithic: it's the foundation of civilisation itself that it does.

My very first job writing about economics was for a Russian magazine, Commersant. I was hired, along with several other broke but fluent English speakers, to edit the translations from Kommersant, the Russian language newspaper. Commersant was, essentially, a weekly magazine in English of the best of the Op/Eds from Kommersant. But the translations were done by native Russian speakers. Which led to their being in fairly clunky English. You don't, ever, translate out of your native language, not for publication you don't. Only into it.

So, there were several of us hired (my memory tells me that Mark Ames was another but that's probably my faulty memory. He was around Moscow at that time, as was Matt Taibbi, but I might be inventing the idea of having met Mark. Certainly talked to him on the phone when I failed to get hired by his newspaper, but that's another story.) to take these translations into English and polish them up. $100 a weekend, good pay for the time and place.

One of the first pieces I was asked to work on was one by a Soviet agronomist. Who was going on about "the scissors". The way in which farm prices were falling relative to other prices. This meant that farmers had to supply more wheat to buy a new tractor for example. And this was terrible and government needed to do something. I started laughing and told the editor that the whole idea was nonsense: exactly this had been happening since we'd actually invented farming. Indeed, it was the very point of inventing farming, that food should become ever cheaper. At which point I was asked "Do you have a degree in economics or something?" I didn't tell them I had a very bad one, just answered "Yes" and so I ended up with a weekly column in Commersant until it folded a couple of months later. Yes, I suppose my column could have been responsible for that too.

But what was true in 1992 in Moscow is true in the US today and has been true of all civilisation ever since the invention of agriculture some 8,000 years ago. The whole point of the system is that the price of food should decline relative to other prices. This is what makes everything else possible. And it's declined a lot in recent decades too.

The poverty line is defined, in the US, as three times the food budget of 1962. That multiple of three being used because back then families used to spend about one third of their budget on food. Now it's more like 10-12%, or a tenth to a ninth. Food has declined in price that much relative to other prices in just my own lifetime.

Which is why it is so insane that the support price for milk will be defined by the ratio of farm to non-farm prices back a century. Of course milk shouldn't have the same relative price it had then: this is the whole point of progress, of advances in farming. That food gets cheaper relative to other things.

I suppose it's not the worst thing that government has ever done but it does so annoy that there's something quite so silly lurking there on the law books.